Market Overview - In May, external pressures eased, and market sentiment improved following the announcement of tariff reductions between China and the U.S. on May 12, leading to a 2.39% increase in the Wind All A index for the month[8][9] - The China Convertible Bond Index rose by 1.75% in May, while year-to-date, the Wind All A index increased by 1.04% and the China Convertible Bond Index by 3.56%[9] Trade Relations - The U.S. and China reached a consensus on tariff reductions, with significant cuts announced, including a reduction from 145% to 30% on certain goods[20][21] - Despite the positive developments, uncertainties remain regarding the sustainability of these tariff changes, particularly with ongoing legal challenges to Trump's tariff policies[24][25] Sector Rotation - The market is expected to continue its rotation among sectors, with no clear leading logic emerging in the short term[32] - High congestion levels in the small-cap sector indicate that stronger supporting logic will be needed for continued performance, while the technology sector shows signs of recovery with low congestion levels[10][12] Policy Implications - The monetary policy has seen a phase of easing, with a 50 basis point reduction in reserve requirements and a 10 basis point cut in the reverse repo rate announced on May 7[37] - Future monetary policy adjustments may depend on domestic economic signals, particularly if the Producer Price Index (PPI) weakens further[32] Convertible Bonds - The convertible bond market is experiencing low volatility, with a need for external factors such as credit events to drive changes[3] - The valuation structure of convertible bonds is diverging, with equity-linked bonds seeing a decline in valuation while debt-linked bonds are slightly recovering[15][19] Risk Factors - The report highlights risks associated with the Federal Reserve's uncertain policy direction and the potential for accelerated sector rotation in the equity market[4] - The ongoing legal disputes regarding tariffs and the potential for further trade tensions pose significant risks to market stability[24][29]